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Fraud Examination: Protecting Your Business from Workplace Fraud 

by | Oct 7, 2020

Financial fraud investigations

Despite the distractions and upheaval the Covid-19 pandemic has had on your business, be careful not to overlook another threat that could be looming around the corner — fraud in the workplace.

Occupational fraud is the misuse of one’s occupation for personal gain and includes anything from stealing office supplies to cooking the books to embezzlement fraud.  According to the Association of Certified Fraud Examiners’ (ACFE) most recent Report to the Nations on Occupational Fraud and Abuse, organizations lose an estimated 5 percent of revenues each year to occupational fraud – which translates to annual global losses of nearly $4.5 trillion. 

How can you protect your organization and avoid the necessity of conducting financial fraud investigations? The starting place for any successful fraud prevention program begins with two key elements: your organization’s ethical culture and the perception of detection.


The cornerstone of any fraud prevention effort is the ethical tone set by an organization’s leadership. Organizations that face financial fraud investigations have often failed to regularly communicate management’s anti-fraud stance or to properly train employees. 

One of the best ways to educate employees about fraud is to develop, implement and enforce a written fraud policy. Fraud awareness training can be incorporated into an employee’s orientation, annual training programs, and an annual statement acknowledging the employees’ understanding of your organizations’ anti-fraud policies. 

Common elements of a fraud policy include:

  • Fraud policy scope.  This section should clearly define the actions that constitute fraud and include language that the policy refers to all employees, including management and executives.
  • Disciplinary Action. Here, the organization should define the administrative process that will be followed if an investigation results in a recommendation for disciplinary action. 
  • Reporting procedures. Employees need to be aware of how and to whom they should report suspicious activity. Fraud reporting mechanisms, such as hotlines, must allow anonymity and confidentiality. Clarify that employees who report incidents will not suffer retaliation.  According to the ACFE’s Report to the Nations, tips are by far the most common fraud detection method. More than 40 percent of all cases reported in the 2020 edition were detected via tips — more than twice the rate of any other detection method. Employees accounted for nearly half of all tips that led to the discovery of fraud.
  • Investigation responsibilities. In this section it’s critical to identify who is assigned the responsibility to investigate alleged fraudulent incidents, and to whom those acts are reported (i.e. management, law enforcement, legal counsel).


The second element of a well-rounded fraud prevention program is to increase the perception of detection. By nature, those who are tempted to commit wrongful acts are less likely to follow through if they believe they will be caught.

An organization can implement a variety of policies and procedures that help increase this perception, depending on the size and complexity of the organization. Examples include:

  • Segregation of duties. Think of a transaction like a circle. Employees should never be in a position to complete the entire circle alone. To overcome the challenge of segregating duties in a small business, insert management into the process. Increase the perception of detection by having bank statements sent to the business owner. To be effective, open and review the statements before delivering them to the bookkeeper. 
  • Mandatory vacations. Concealment is the modus operandi of fraud.  Mandatory time off reduces the opportunity to hide wrongdoing.
  • Job rotation. The longer a person is in one position (largely unsupervised), the risk of occupational fraud likely will increase.
  • Surprise audits. Keep employees on their toes. Surprise audits, where feasible, reduce the opportunity to alter, destroy or misplace evidence of wrongdoing.

By instituting a fraud policy, fraud training and procedures to increase the perception of detection, you can decrease the likelihood that your organization falls victim to occupational fraud.

To learn more about how we can help clients detect fraud, contact us for consultation.

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